Thailand’s Baht Halts Five Weekly Rally on Intervention Risk

Recent appreciation in the currency, which reached the
strongest level since 1997 on March 20, has been “excessive,”
Bank of Thailand Governor Prasarn Trairatvorakul said on March
20. The nation’s exports may increase 9 percent this year, lower
than the prior forecast of 10.5 percent, the finance ministry
said today in a statement. The baht also weakened amid
speculation local units of companies based in Japan, the biggest
foreign investor in Thailand, will repatriate profits before the
Japanese fiscal year ends March 31.

“After a sharp appreciation last week and with concerns
expressed by authorities, there was speculation about possible
intervention,” said Kozo Hasegawa, a foreign-exchange trader in
Bangkok at Sumitomo Mitsui Banking Corp. “There have been some
corporate flows in the past few days as we approach the fiscal
year-end for Japan.”

The baht weakened to 29.29 per dollar as of 3:28 p.m. in
Bangkok from 29.28 a week ago, according to data compiled by
Bloomberg. That is the first five-day decline since the period
ended Feb. 15. The currency reached 29.08 on March 20, the
strongest level since a 1997 devaluation sparked the Asian
financial crisis. It has strengthened 1.6 percent this month,
the most in Asia.

One-month implied volatility in the baht, a measure of
expected moves in the exchange rate used to price options, rose
six basis points to 5.13 percent from a week ago. The rate was
unchanged today.

Exports Fall

A government report yesterday showed exports decreased 5.8
percent in February while imports climbed 5.3 percent, resulting
in a trade deficit of $1.6 billion, a fifth straight monthly
shortfall. Kyoichi Tanada, president of Toyota Motor Corp.’s
Thai subsidiary, said this week the firm may ask the Southeast
Asian nation’s government for assistance if the baht continues
to appreciate, adding that an exchange rate of 29 per dollar
would be a “problem.”

The broader measure of the current-account turned to a
surplus of $1.6 billion last month from a deficit of $2.2
billion in January, according to central bank data today.

The baht may average 29.4 per dollar in 2013 compared with
31.1 last year, the finance ministry’s statement also said today.
The ministry also raised a 2013 growth forecast to 5.3 percent
from its earlier prediction of 5 percent. Gross domestic product
expanded 6.4 percent in 2012.

The yield on the government’s 3.625 percent bonds due June
2023 fell two basis points to 3.52 percent from a week ago,
according to data compiled by Bloomberg. The rate, which rose
six basis points today, reached 3.46 percent yesterday, the
lowest level since Nov. 6.

Global funds bought $3.2 billion more local sovereign debt
than they sold this month, adding to net purchases of $6.4
billion in the first two months of this year, according to data
from the Thai Bond Market Association. Money managers based
abroad bought $233 million more local equities than they sold
this month through yesterday, exchange data show.

“The fund inflows are quite big and that put downward
pressure on local yields,” Hasegawa said.